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Why the Northwest power grid is still dumb

Installing a smart meter on your home puts you on a two-way street with the power grid. Federal Energy Regulatory Commission Chair Jon Wellinghoff says regional, independent grid operators can manage that two-way street more efficiently than individual utilities that sell power. But the Pacific Northwest doesn't have one.

Wellinghoff gave a fascinating presentation on the many advantages of smart grid technology. It can save energy and cut costs. It can allow us to use more renewable power, generate it at home and sell it for a profit – even get paid for plugging in electric cars.

FERC regulates interstate electricity transmission, as well as its natural gas pipelines. The agency is facing the hard fact that generating more renewable power will require more transmission. Smarter grid management will also help balance the variability of solar and wind energy, Wellinghoff said.

Among other topics, I asked Wellinghoff about the highs and lows of renewable energy development in the U.S., the problem of limited transmission in the Northwest, and why we can’t do more of the smart grid tricks that he promoted in his talk. Here’s the Q&A:

FERC Chairman Jon Wellinghoff

Q: What’s encouraging and discouraging renewable energy development in the U.S.?

A: What’s encouraging is we have so much of it, and also the prices are coming down both in wind and solar. Technology is advancing quickly in both of those areas. That’s extremely encouraging – that we have so much resource and such a strong push for advancing it and making it more cost effective.

The bad news is most renewables are in remote locations so we need tremendous amounts of transmission to deliver renewables from the remote areas to where the loads area where people live and work and where industries are. So, we really need policies in this country ultimately that enable that transmission, and that’s really what FERC is trying to do to develop those renewables cost-effectively.

Q: How are you coming on that goal of making renewable energy development more cost-effective?

A: I think pretty well actually. We have a proposed rule – the Transmission Planning and Cost Allocation Rule – that looks to develop processes for planning for these kinds of transmission lines and also allocating the cost for them as well. Asking the different regions including the Northwest to develop planning and cost allocation methodologies … and in essence report back to us on how they’ve done. That, and make sure those processes are consistent with our broad policies. We think if they’re done that way in that consistent manner then ultimately it will enable developers to develop long-distance high-voltage lines to deliver renewables.

Q: Does the Northwest need a new approach to transmission?

A: You’re very rapidly reaching your limits in the Northwest here with respect to your ability to develop renewables and have those renewable systems ultimately provide you with power here in the Northwest. And, more importantly, you have limited transmission to be able to deliver those renewables outside the Northwest to areas that have larger loads like California and southern Nevada and Arizona.

So we’re going to have to develop transmission not only throughout the Midwest, but also in the Northwest as well. Again, what’s inhibiting that is what’s inhibiting it all over the country. And that is structures for planning and cost allocation that recognize that we’re going to be developing long lines across regions – not simply staying in one region like traditional power plants have done but moving that power across an entire interconnect like the Western interconnect.

Q: Do we need an independent or regional grid operator?

A: Having an independent system operator or regional transmission operator I think is very beneficial thing to any region including the Northwest.

In fact, I know the entire Western interconnect is looking at something called an energy imbalance market that would help you integrate wind into your system better. A study done out of Western Electricity Coordinating Council shows if there was an energy imbalance market put in the West including the Northwest that there would be hundreds of millions of dollars in savings from those systems overall.

A map of independent grid operators across the U.S. and Canada. Notice the white space in the Pacific Northwest.

I think those systems will, one, provide for efficiencies and savings on one hand. And they will also enable things like demand response and electric vehicles – and other things on the consumer side to participate in those markets and by participating lower their costs and create businesses that can scale those kinds of technologies into the consumer market so consumers can continue to control their energy costs. Without those kinds of structures – without a market like we have in the Eastern states and in the Northeast and Midwest and throughout California and Texas you cannot effectively have the types of economic drivers that will allow that technology – demand response and smart grid – to scale. It will not scale unless you have those markets in place.

Q: Are utilities standing in the way of that kind of market?

A: If you talk about the energy industry overall, parts of the energy industry benefit. Other parts may not benefit because what you’re doing, in essence, is bringing more competition into the region. There are entities that are now satisfied with those monopoly structures – that benefit from those monopoly structures. So, it’s going to be different in every region.

You’re going to have to look at those people who are the beneficiaries and those who are not and you’re going to have to figure out how to share benefits in ways that hopefully most people will benefit. Each region is going to have to work it out on their own because they are voluntary structures. They’re nothing that FERC imposes. We don’t impose these on anybody. It’s not a standard design. It’s not a standard process. Each region has to decide for itself. There are six in the country right now, and they’re all different, all voluntary, and all operate independently.

A: I think you’re talking about Jevons Paradox. Certainly if you take out a 100 watt light bulb and put in an aluminum equivalent – a 20 watt compact fluorescent or or 15 watt LED light. You’re not going to now put in four of those. You don’t need four times the light. You need a set amount of light. So, if you make your lighting more efficient you are going to reduce your overall usage. So I’m not completely on board with this discussion of Jevons Paradox. I don’t think it’s actually applicable to energy efficiency in the way a lot of people are arguing.

Q: Are state energy policies playing a bigger role in growing renewable power than federal policies?

A: I think federal policy definitely plays an equivalent role. Number one, the federal government has tax incentives to play off the renewable portfolio standards many states have. The production tax credit has been very effective in moving forward and scaling renewable systems.

But in addition to the tax policies, the policies that FERC has been putting into place have been effective as well by enabling transmission. All these renewable systems in fact would not be delivering their power to loads if we didn’t have new transmission put in place, and also policies that are tailored to variable resources.

We have a proposed rule out right now on variable energy resources that looks at the integration costs and how we can reconfigure the system to lower the integration costs of putting wind and solar into the system by doing better forecasting and more granular scheduling. By doing those things, we can reduce the cost to all consumers of putting more renewables into the system. So, federal policies play a very cooperative role with the state policies both on a tax side and the regulatory side, and they all need to work together for us to get where we want to go.

Q: Can we get to all renewable power in the U.S.?

A: I think we can get to much larger proportions of renewable power, and the amount that we have proportionally is going to depend on the region. I believe in a state like Nevada you could have as high as 70 to 80 percent renewable power because you have so much geothermal, you have tremendous amounts of solar, and you have the opportunity to combine those two and get to very high levels. There may be other regions of the country – the far Southeast, for example – where that’s may not be possible, but overall I think we can get to as high a level as California is proposing.

The 33 percent standard just passed into statute there in California, but we do have to recognize getting to those higher levels is going to require looking at the power grid as an entire system and operating it very systematically in a way that ensures that we have the demand side helping integrate those resources in things like demand response and energy efficiency. If we don’t do that we’re going to be hampered.